PAGAR POR EL ÉXITO
AS A POLICY TOOL
MAYOR BEN MCADAMS
WITH JEREMY KEELE AND FRASER NELSON
As mayor of Salt Lake County, a job in which I represent the 1.1 million people
who live in the Greater Salt Lake metro area, my job is to ask, What are we
spending our money on? What is working for our residents—or not? Qué
programs should be tweaked or stopped altogether? How can we do better?
And how will we know if our efforts are working?
is essentially
While Utah has one of the nation’s boom-
ing economies, year after year Salt Lake
flat.
County’s budget
Without additional resources, using tax-
payer dollars effectively and efficiently is
not only ideal, it’s a necessity. Sin embargo,
as is often the case, state and local govern-
ments are reactive—paying for things that
often go wrong, such as our prisons and
homeless shelters, which provide only
limited treatment for people with crim-
inogenic risk factors or behavioral health
disorders. Treatment services are inade-
quately funded to ensure long-term bene-
fits, and even though we know prevention
can create savings for years into the
future, we rarely invest adequately in the
prevention side of the equation. Pero
whether we are paying for a safety net or
prevention, the county government has a
difficult time justifying the time and cost
of evaluating the value of those invest-
ments for the people we serve.
Government has a disincentive to under-
stand the impact of its investments. I
often wonder how qualified the county’s
elected leaders, with our diverse qualifica-
tions and backgrounds, are to assess the
complex behavioral health programs we
so often are asked to fund.1. A grant appli-
catión, a site visit, a public hearing—these
are the usual ways the county determines
how to deploy most of its discretionary
dollars. Además, once programs are
funded, there is no political incentive to
ask which had a measurable impact, como
ending an ongoing program is very diffi-
cult.
The central challenge of our local govern-
ment is to shape the future of the Salt
Lake metro area in ways that we carefully
choose. As mayor of Salt Lake County, el
future I envision is one where our $1 bil- lion budget goes primarily to programs that deliver on their promises, where the partisan divide playing out on the nation- al level contrasts starkly with the compe- tence of our local government, where cit- izens can trust that federal, estado, and local tax dollars are working for them, and that their government delivers on its promis- es—in short, a future where the govern- ment pays for success. 50 innovaciones / Policy Design Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Aquí hay un ejemplo. In the late 1980s, Salt Lake County sought to end the digital divide. We opened ten technology labs in low-income neighborhoods, which pro- vided community access to computers. We hired staff to help residents learn how to use a computer, draft a resume, and apply for jobs online. Thirty years later, while a digital divide does remain, Utah’s population is the nation’s most Internet- conectado, our libraries are full of com- puters, and the socioeconomic makeup of many neighborhoods has changed dra- matically. That is the good news. The bad is that, while four of the original technology labs remained when I took office, the classes were typically attracting just 3.3 people per class and the computers sat idle 76 por ciento del tiempo. It was clear that the $273,000 it was taking to operate this out-
dated, underutilized program each year
would be far better spent on more target-
ed efforts that were measurably effective.
I had pledged to abandon projects that no
longer met the needs of our residents, y
the labs seemed an obvious choice.
But cutting this program was not so easy.
Rather than looking at the impact and
context of the desired outcome of direct-
ing funds where the need and impact
were greatest, we were swayed by a few
labs
passionate proponents of
(including lab staff), and by the fact that
500 of the country’s one million residents
still had active lab accounts. The outputs
—a few people served—won over the
impacto, and the program continued
through the fiscal year.
el
It is easy for government to make deci-
sions based on the number of people
served, rather than on the number of lives
changed. The Great Recession exacerbat-
ed this bias. The solution to increased
need is often an increase in funding,
without first asking if the increased need
may be due to the fact that the program is
not effective. We often fail to articulate
the results we want, much less how we
will measure those results. In other
palabras, we do not define the future we
ABOUT THE AUTHORS
Ben McAdams is Mayor of Salt Lake County, Utah. Jeremy Keele is the CEO and President of
Sorenson Impact. Fraser Nelson is the Managing Director of Sorenson Impact, and the former
Director of Data and Innovation for Salt Lake County.
From conception to implementation, each author has played instrumental roles in advancing inno-
vation in government. Mayor McAdams, in prioritizing data-driven policymaking, has implement-
ed Pay for Success elements throughout Salt Lake County government. Jeremy Keele, who served
as Senior Advisor to the Mayor building stakeholder coalitions and writing key enabling legisla-
ción, now serves as CEO and President of Sorenson Impact, a Pay for Success Intermediary. Fraser
Nelson entered Salt Lake County government as the Mayor’s Director of Data and Innovation—
leading subsequent Pay for Success initiatives for the County—after Jeremy Keele’s transition to
Sorenson Impact; Fraser now serves as Managing Director of Strategic Partnerships for Sorenson
Impact.
© 2017 Ben McAdams, Jeremy Keele, and Fraser Nelson
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Mayor Ben McAdams with Jeremy Keele and Fraser Nelson
choose, we respond to the future that is
barreling toward us.
OUR FIRST PAY FOR
SUCCESS INITIATIVE: HIGH-
QUALITY EARLY
EDUCATION
En 2011, while serving on the board of the
United Way of Salt Lake (UWSL), I
learned about the joint research being
conducted on innovative interventions to
improve early childhood learning by
UWSL, Voices for Utah Children, y el
Granite School District to measure the
impact high-quality preschool has on
some of our county’s most at-risk chil-
niños. Previous studies had shown that
these children were entering kindergarten
with vocabularies that averaged 500-600
fewer words than their peers (Hart &
Risley, 1995), which put them at a signifi-
cant disadvantage socially and cognitive-
ly. As a result, they often were placed in
remedial education programs. Datos
showed that, once on that track, estos
kids had virtually no chance of catching
up and
leaving special education.
Sin embargo, some national studies and the
rigorous evaluation of the local preschool
program confirmed the positive impact
access to high-quality preschool could
have for these at-risk kids, including giv-
ing them a chance to avoid a lifelong
opportunity gap.
Mientras tanto, the UWSL and Voices for
Utah Children had developed a new way
to fund innovative, high-impact pre-
school programs, which today are known
as social impact bonds, or Pay for Success
(PFS). The local or state government
promised to use private resources in the
form of loans or philanthropy to launch
programs with clearly defined outcomes.
The government agreed to repay the loans
if and when the agreed upon outcomes
were achieved.
Around the same time, an innovative
educator in the Granite School District
was changing the odds for vulnerable
niños. Brenda Van Gorder’s high-qual-
ity preschool had been independently
evaluated, by Dr. Mark Innocenti at the
Utah State University, and the results
were more than promising—they were
proven. The UWSL estimated that more
than 36 percent of the state’s three- y
four-year-olds needed what Brenda was
delivering. Sin embargo, the barriers to pro-
viding a program proven to have long-
term social and financial benefits for these
niños, their families, and taxpayers
were the same we encountered for so
many issues. It boiled down to money and
política.
Primero, the money. UWSL had commit-
ments from Chicago-based philanthro-
pist and early education advocate J. B.
Pritzker, Goldman Sachs, and local phi-
lanthropists to provide funding for the
nation’s first Pay for Success initiative to
support early childhood education. Estos
private partners had agreed to provide
$4.6 million in a senior loan and a subor- dinate loan of up to $2.4 million to the
UWSL. These funds allowed the school
district to serve an additional cohort of
595 low-income three- and four-year-olds
for the 2013-2014 school year. UWSL
agreed to oversee the initiative and man-
age the repayment of these loans, con
interés, should the program prove suc-
cessful.
The success of the program was to be
measured in a straightforward way: en el
end of each school year, the children in
the cohort deemed most at risk by inde-
pendent experts would be enrolled in
either remedial or mainstream classes.
The Utah government would save $2,607 every year for each child in the cohort who advanced with their peers on sched- ule. Because the state would benefit from each success, we were hopeful it would serve as the successful outcomes payor— paying back the loans to the original 52 innovaciones / Policy Design Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Pay for Success as a Policy Tool investors. UWSL and other stakeholders approached the state legislature to sup- port our Pay for Success proposal. What we know—and was confirmed through this process—is that government innova- tion is tough and challenging, but the results are often worth the effort, especial- ly when we are able to bring different views into consensus. Ahora, the politics. Although Utah is a red state, I was elected mayor of Salt Lake County as a Democrat and had recently retired as a state senator to assume my new duties. My Republican colleague Senator Aaron Osmond (Sí, of the singing Osmond family) agreed to spon- sor our Pay for Success legislation. As Senator Osmond explained, “We have to start talking about solving long-term problems with long-term solutions. We’re tying performance to the financing. We’re bringing the private industry to the table to support the expansion of these pro- grams.” But proposing that the state fund preschools created a controversy. One state senator characterized the program as allowing “parents to simply relinquish their responsibilities in raising their own children.” Our local conservative Eagle Forum president led the grassroots oppo- posición, saying that “the solution is not to throw more money at government pro- grams that don’t work. Instead we need to promote marriage and family. A better solution would be to stop giving low- income mothers handouts that encourage them to have more babies outside of mar- riage.” The debate about this program was not only about children but about the financ- ing model itself. Pay for Success was, in Senator Osmond’s words, “so innovative that many of my colleagues are confused by it.” And, en efecto, some were. El COM- plexity of the financing structure, the evaluation associated with making pay- ments based on success, and using private funds for a public purpose in the social sector was a hard sell. Some of my col- leagues on the Democratic side of the aisle were uncomfortable with lenders being paid back with interest, arguing that the bill was making rich people richer on the backs of low-income children. In the end the bill failed. Sin embargo, the debate made it clear to me that bringing the rigor of the private sector to funding a social service would offer government a truly revolutionary way to invest in its programs. It would divorce both the pro- gram design and the decision about whether the program was successful from the politicians. I was determined to use Pay for Success to deliver evidence-based services to the people who need them most, and as a broader policy tool. I proposed that Salt Lake County join with the UWSL donors who were ready to step in to the “pay for success” role origi- nally proposed for the State of Utah. This meant that the county and donors would put up $350,000 y $1 millón, respetar- activamente, for the first cohort of students. We did, and with great results. The preschool program enrolled 590 kids in the fall of 2013. Of the 110 four-year-olds inde- pendently predicted to have the highest risk of falling into a starkly measurable achievement gap and being placed in spe- cial education without intervention, only one actually needed special education services after one year in preschool. Even more significantly, the county’s investment had tremendous influence on the political debate. In March 2014, the Utah state legislature passed the Utah School Readiness Initiative, led by the governor’s Office of Management and Budget, with support from the Utah Department of Workforce Services and Office of Education. This legislation established the school readiness board, which was committed to advancing early childhood education in a state with his- toric antipathy toward the idea of chil- innovaciones / volumen 11, number 3/4 53 Descargado de http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Mayor Ben McAdams with Jeremy Keele and Fraser Nelson dren leaving the home before kinder- jardín. Most importantly, early support from J. B. Pritzker and the other investors allowed more than 3,000 children to receive early education over the course of the program. Last year Utah invested $10
million directly in early childhood educa-
tion—a true policy breakthrough. De hecho,
the state has not only begun to value
investing in its youngest residents, Tiene
expanded its Pay for Success vision to
include a criminal justice pilot.
DRIVING POLICY IN SALT
LAKE COUNTY: PFS
PROJECTS FOR RECIDIVISM
AND HOMELESSNESS
Driving policy change using PFS pro-
grams requires engaging multiple stake-
holders, and when I became mayor, I
went all in for Pay for Success. Salt Lake
County spent a full year working with
Third Sector Capital Partners, a Boston-
based intermediary, to identify areas
where a strategic investment could yield
the results we wanted. Three issues rose to
the top: early maternal and child health,
homelessness, and recidivism. We spent
the next 18 months constructing two
projects that launched in the winter of
2016. These two PFS projects are focused
on addressing high rates of recidivism
and the growing number of people expe-
riencing homelessness. As with our early
childhood initiative, we have found that
resources and politics are the critical bar-
riers.
These Pay for Success transactions are
incredibly complex. They involve count-
less hours of research and debate, y
making hard choices that involve many
jugadores. They cause us to ask tough ques-
tions about what we are doing and why.
They expose flaws in our thinking, dis-
rupt long-held assumptions, and can
strain relationships. Because they take
years to construct, implement, and evalu-
ate, changes in policy may shift the foun-
dation on which a program is built, de este modo
potentially changing the impact and eco-
nomics of the project. Pay for Success is
not for the faint of heart, but transforma-
tive work rarely is. Here is some of what
we have learned so far.
for Success
Pay
takes up-front
resources. It takes an investment of both
time and money to understand the issues,
datos, and evidence underlying our current
sistemas. We must establish clear, measur-
able outcomes and find consensus on how
much we will pay to achieve them.
Finalmente, we must work with myriad part-
ners to design, evaluate, and fund the pro-
gram, and it is important to balance the
partners’ interests as the projects are con-
structed. Por ejemplo,
the service
providers (usually nonprofits) must pro-
pose interventions that have enough
chance of success to attract lenders but
are ambitious enough to meet the lofty
expectations of elected officials. Before we
even started, we raised $1 million in out- side capital, including grants through the national Social Innovation Fund, and appropriated an additional $250,000 en
county dollars into a development fund to
support project construction. These funds
only partly paid for the work of the inter-
mediary, the evaluator, the “special pur-
pose vehicle” created to hold the contracts
made with providers and funders, y
our legal counsel. We made small grants
de $25,000 each to our two chosen non- profit service providers, The Road Home and First Step House, both of which had been receiving PFS capacity-building services from Sorenson Impact prior to their selection. Pay for Success takes time, but the process of discovery it affords is well worth it. One of our analyses determined the relation between those incarcerated in our jails and those living in our shelters. County policy did not previously distin- guish between individuals who were per- sistently homeless, those who were cycling in and out of our jails, and those 54 innovaciones / Policy Design Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Pay for Success as a Policy Tool who were released from jail only to end up in a shelter or on the streets. We ana- lyzed two years of individual data and made a rather startling (though in retro- spect, obvious) discovery: our jail was serving as the region’s largest homeless shelter, and our homeless shelter was pro- viding many former inmates with perma- nent housing. These facts have driven policy to reform our county criminal jus- tice and homeless services systems, india- pendent of the PFS projects. As we dove more deeply into the PFS project construction phase, we learned that a pattern of arrest for “homeless” infractions, such as public intoxication, was very high among people who had spent on average between 30 y 364 days in a shelter each year. These persistently homeless individuals had high arrest rates for DUI and drug possession, but just 5 percent had received a substance abuse assessment. Además, despite the known correlation between homelessness and mental health disorders, solo 10 percent had received an assessment for mental health services. A retrospective analysis found that 42 percent of these persistently homeless individuals became chronically homeless within two years—a terrible outcome. They clearly needed a different approach, a realization that resulted in Homes Not Jail, a Pay for Success project that provides rapid rehousing and inten- sive support services. Our analysis of the population that cycles in and out of our jails for more serious criminal charges was also revealing. While risk/need assessments take place at various points in the arrest, booking, and sentencing process, they are rarely con- sidered when assigning individuals to probation programs. Probation programs primarily address behavioral disorders, are relatively short term, and place high- risk offenders in programs alongside lower risk individuals. Our data revealed that this high-risk/high-need population of offenders had been arrested on average 2.8 times in the course of four years and had spent nearly a year in jail. These indi- viduals clearly needed a different approach, which led to the creation of Recovery, Compromiso, Evaluación, Career Development and Housing, or REACH, a comprehensive community- based treatment program specifically designed to meet the needs of high-risk offenders in Salt Lake County. Pay for Success needs partnerships. Building these two new PFS projects required us to call on the good will and leadership of many community partners. The complex and highly confidential nature of the data analysis required data- sharing or referral agreements with the Utah Division of Workforce Services, the state Adult Probation and Parole Office, the county jail, the county’s Criminal Justice Services and Behavioral Health departments, and the service providers, First Step House and The Road Home. Figuring out who could receive raw data and match individuals across systems and programs involved the cooperation of these partners, as well as hours of uncom- pensated work. Each PFS project has a steering committee of local experts who meet monthly, as well as a working com- mittee comprised of our staff, the inter- mediary, the evaluators, and the nonprof- it providers, who met weekly for over a year. We estimate that 10,000 persona- hours were put into these projects from conception to launch. Pay for Success needs a reliable source of repayment to attract lenders. To avoid the risk that future elected officials might not honor the commitment to repay those who invested in our projects, the funds needed to make the “success payments” (in our case, $11.5 millón)
were held in an escrow account set up
solely for this purpose. In a time of flat
budgets and a growing population, configuración
up an escrow account required the county
to either reallocate funds or find an addi-
tional source of revenue. We proposed
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Mayor Ben McAdams with Jeremy Keele and Fraser Nelson
that we continue the revenue that had
been directed toward a bond debt service
dating to construction of a county jail 20
years earlier. The bond was due to roll off
in December 2015, and we were able to
direct this revenue to capitalize our Pay
for Success escrow incrementally over a
three-year period, while also increasing
funding for criminal justice programs.
The issue of the source of repayment
illustrates that Pay for Success is a policy
initiative and, as such, a political enter-
prise. It also is a great example of a policy
with bipartisan appeal. As mayor, I pro-
posed a budget to the county council,
que tiene un 5-4 Republican majority. Mi
Republican colleagues like this policy tool
because it engages the private sector. Mi
Democratic colleagues like the fact that it
brings new resources to social issues.
Y, both like the fact that it requires
clear outcomes and uses a rigorous evalu-
ation to measure success. But these bene-
fits, entre otros, did not guarantee
smooth sailing.
Criminal justice reform has long been a
priority of Salt Lake County. Over the
past decade, the council, together with the
sheriff, district attorney, and my prede-
cessor, Mayor Peter Corroon, funded new
tools for collecting and analyzing data,
and to make decisions based on those
datos. We benefitted from assessments of
our system by consultants, the Pew
Charitable Trusts, and the Council of
State Governments, and developed new
programas, including a nationally recog-
nized intercept model, to reduce incarcer-
ación. Despite these efforts, we still had an
increasing crime rate and a stubborn
recidivism rate. We were agreed that, en
addition to implementing evidence-based
intervenciones, we needed to set measure-
able outcomes and evaluate our efforts
more rigorously. When the source of
funding was identified for PFS, a policy
debate ensued.
The influx of new revenue related to the
jail bond provided an opportunity to
address other pressing unmet needs in the
offices of the sheriff and district attorney,
the behavioral health department, y el
Salt Lake Legal Defenders Association,
particularly staffing. I had also proposed a
fourth PFS initiative designed to address
the needs of high-risk mothers and their
young children through home visits.
Sin embargo, although the impact of these
programs on the long-term success of at-
risk children is clear, the link between this
very early intervention and later avoid-
ance of the criminal justice system was
too much of a stretch for a majority of our
council members. It became clear that the
council wanted the jail bond funds to be
used only for programs related to crimi-
nal justice. The homelessness project
came under fire as well, but because we
had data that showed a direct overlap
between the shelter and the jails, el
council ultimately agreed to move for-
ward on both the homelessness and
recidivism reduction PFS programs.
The public also had several opportunities
to voice their opinion. A county ordi-
nance requires a study and public hearing
to determine the value the county will
receive for funds appropriated “in aid of a
private enterprise project.” Because the
PFS model requires the repayment of
loans (plus interest) to private enterprises,
the county needed to define the tangible
and intangible benefits of this transaction
in a public report. The 20-page report
described expenditures saved, expenses
forgone, and other “comforts or conven-
iences.” It also enabled us to describe to
the public the benefits of the two pro-
gramos, and to reach consensus on those
benefits between the mayor and other
elected officials.
A second opportunity for public input
came during the budget hearing process.
Although our residents had been paying
the tax levy to fund the jail for decades
and the proposal had bipartisan support,
some characterized continuing the bond
56
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Pay for Success as a Policy Tool
debt service as a tax increase. This caught
the attention of outside groups like
Americans For Prosperity. For the first
time in as long as anyone could remem-
ber, passage of the budget was delayed to
allow sufficient debate on the PFS model,
the two projects, and the retiring jail
bond. In the end, county council mem-
bers were resolute in their effort to con-
tinue to reform the county criminal jus-
tice system and to add PFS as a policy
tool.
WHAT MAKES THE
DIFFERENCE
PFS is so compelling to me as a policy-
maker that I was surprised by the intense
debate about nearly every aspect of the
project and the complexity of implement-
ing a new model in government. De
how to structure the procurement and
develop a new kind of contract to negoti-
ations with funders, PFS has been any-
thing but easy, but a few early decisions
made a clear difference in our ability to
move past obstacles.
Political will is key. I am passionate
about the promise of PFS to transform
how we govern and to improve the out-
comes we provide for residents and tax-
payers alike. Recognizing this distinction
is important, as not all residents are tax-
payers: many of our residents are chil-
niños, are of low-income households, hacer
not yet hold U.S. citizenship—and I con-
sider it a big part of my job to ensure that
all voices are heard and respected.
I prioritized innovation in Salt Lake
County government and focused on data
and evidence to achieve better outcomes.
Pay for Success is a tangible policy tool
that requires us to deliver on this promise.
The complexity and rigor of the Pay for
Success program did test our resolve, pero
meaningful change requires leadership
and commitment, and the potential bene-
fits were simply too great to give up.
Por supuesto, I do not spend all my time on
PFS. A critical piece of our success is due
to the dedication of the county’s lead staff
member, Fraser Nelson, my former direc-
tor of data and innovation, and the criti-
cal services provided by our project man-
ager, Sorenson Impact Center, y el
intermediary, Third Sector Capital
Partners, led by Jeremy Keele and John
Grossman, respectivamente. Their staff mem-
bers needed to think far outside the box,
speak to potential funders and clients,
work closely with nonprofits and philan-
thropists, and build complex economic
models that they then translated for elect-
ed officials. They had to overcome dozens
of hurdles, large and small, and be able to
discern when an issue was significant
enough to involve the mayor.
A key early decision was to procure the
Community Foundation of Utah as the
legal and financial intermediary for the
esfuerzo. The foundation established the
special purpose vehicle mentioned above
that enables us to engage banks in lending
without a potential pay-to-play conflict.
The foundation also held a competitive
request for proposal process, which led to
the selection of the Sorenson Impact
Center and the Utah Criminal Justice
Center, both at the University of Utah,
and the law firm of Dorsey & Whitney.
Each partner plays a vital role in the
dozen or more contracts that will steer the
projects through the next six years.
The county’s rigorous procurement
proceso, which included outside experts
as well as the district attorney and sheriff,
assured the public and potential funders
that our providers understood the com-
plexity and transparent nature of the PFS
modelo. Potential providers were required
to submit a written application and con-
duct an interview. The resulting contracts
covered just the project construction
phase, so either side could back out if fun-
ders did not commit, the intervention was
not what we wanted, outcomes were not
significant enough, or the economic
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Mayor Ben McAdams with Jeremy Keele and Fraser Nelson
model was not sustainable. This proved
important when our proposed home-vis-
iting Pay for Success program for at risk
infants and their mothers had to be aban-
doned for lack of support from the county
council.
As noted, the two providers selected for
the program were The Road Home, a
nationally recognized shelter and perma-
nent supportive housing provider, y
First Step House, a residential and outpa-
tient treatment provider with a long his-
tory in our community. These organiza-
tions are taking a risk right along with us.
Finding organizations so dedicated to the
mission that they are able and willing to
open themselves to close scrutiny and a
most rigorous evaluation could set a high
bar for performance, but that is the cor-
nerstone of any PFS project.
Although I was initially unsure of the
need for a randomized control trial
(RCT), building a gold standard of evalu-
ation into the projects has been beneficial.
Our evaluation team, led by Dr. Rob
Butters, analyzed reams of data from mul-
tiple state and county sources to identify
the high-cost, high-need populations that
could benefit from a new way of provid-
ing service. The RCT, which was designed
(and redesigned) for both projects, pro-
vides policymakers, funders, and taxpay-
ers with a critical, independent assess-
mento, one that enables them to under-
stand if and how the intervention delivers
on outcomes and improves lives. While it
was an additional expense, the RCT
model created public and political sup-
port for both the interventions and the
PFS model, and it has been key to attract-
ing funders.
THE BENEFITS OF PFS
Since launching these three PFS projects
in the Salt Lake metro area, we have come
to see the potential benefits of using this
policy tool across the county.
PFS enables our nonprofit partners to
access exceptional capacity-building
resources. Paramount is the practical
application of research in developing new
models of care that target specific groups.
Hours have been spent on the economic
modelo, which helps in building multiyear
budgets that allow the programs to scale,
or to wind down if they are not successful.
The fact that these partners and our
experts, not politicians or bureaucrats,
design programs to achieve the outcomes
the government established has been lib-
erating. We used to reward programs for
their outputs (heads in beds, people in
treatment, etc.), but now we are asking for
independent proof of outcomes—a much
scarier thing. The upside is that, bastante
than the uncertainty of raising money
each year, the programs have our com-
mitment for an annual appropriation
based on what we both agree are the
results they need to deliver. They no
longer have to guess the amount they are
likely to be awarded. Our providers are
deeply dedicated to their mission and
want to make a long-term difference. Pay
for Success will let them know for certain
that they are making a difference and
enable them to share their success with
other funders and the community. Mientras
these projects are risky, we are extremely
grateful for our providers’ willingness to
participate in the rigor of an RCT and to
stake their reputation on meeting ambi-
tious outcomes.
PFS gives our funding partners an oppor-
tunity to invest in new programs that
show promise and to know if those
investments are providing the promised
returns. The unique capacity-building,
economic modeling, and evaluation built
into the intervention enable philanthro-
pists to leverage their giving tenfold, y
if the programs they invest in are success-
ful they can recover their funds to use for
another philanthropic purpose. Our lend-
ing partners will be able to see their
investment qualify as Community
58
innovaciones / Policy Design
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Pay for Success as a Policy Tool
Policy Benefits of Pay for Success
Pay for Success has the potential to
(cid:2)(cid:1)Measurably improve the lives of people most in need;
(cid:2)(cid:1) Develop a more rigorous, outcomes-focused, and sustainable way to address social
challenges in our communities;
(cid:2)(cid:1)Support scaling of evidence-based practices by the public and nonprofit sectors; y
(cid:2)(cid:1)Increase government accountability by directing resources and funding toward effec-
tive programs that actually improve lives.
Pay for Success helps provide
(cid:2)(cid:1)Underserved individuals with the highest-quality supports they need to thrive;
(cid:2)(cid:1)Social service organizations with the stability of up-front, flexible funding that enables
them to scale and focus on delivering proven, outcomes-focused services;
(cid:2)(cid:1)Governments with the flexibility to support preventive services that lead to reduced
costs and better long-term outcomes;
(cid:2)(cid:1) Taxpayers with the security of knowing that government resources are directed
toward programs that produce demonstrated results for society; y
(cid:2)(cid:1)Funders with the opportunity to put their capital to work in service of society.
Reinvestment Act credit or Program
Related Investment. What we learn from
these two projects will help frame other
giving in the areas of homelessness and
criminal justice.
Salt Lake County residents benefit from
PFS because it allows government offi-
cials to identify programs that have been
proven to effect the positive change we
seek for our community, to increase our
investment in those programs, and to
stop programs that are not effective.
Actualmente, 76 percent of the county’s gen-
eral fund resources are consumed by
criminal and social justice services: el
jail, the district attorney’s operations, el
Salt Lake Legal Defender Association,
mental and substance abuse treatment
programas, and providing emergency shel-
ter to those who otherwise would live on
the streets. We can now validate two
innovative programs that we hope will
reduce the ever-growing impact these
services have on our budget. Taxpayers
are well-served when their investments
provide the outcomes we need—not the
results we hope for.
Most importantly, we hope these initia-
tives will truly improve the lives of those
we serve. It is one thing to use taxpayer
dollars unwisely on a program we never
evaluate and cannot say makes a definite
diferencia, but it is far more wasteful, y
harmful, when we hold out the promise
that a housing voucher or a treatment
program will help someone change his or
her life and then fail to deliver. If we fail,
we fail not only the individual but their
family and, al final, our community.
Homelessness and recidivism are difficult
asuntos. We spend tens of millions of dol-
lars on related programs each year and we
ask (or mandate) that thousands of people
take part in these programs, so obviously
we want them to be effective. PFS is help-
ing us reach that goal.
As PFS expert Eileen Neely suggests in
her blog, “Is Pay For Success Collective
Impact?” our PFS contracts are a “forcing
mechanism” to bring together disparate
parties at all levels of government with
innovaciones / volumen 11, number 3/4
59
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Mayor Ben McAdams with Jeremy Keele and Fraser Nelson
Taxpayer Benefits of Pay for Success
At target levels, the two projects will deliver the following community impact:
Tangible benefits to the county include the creation of at least ten new jobs. The services
these jobs provide will have a multiplier effect. Successful interventions have a strong
employment outcome for the service recipients. The goals for individuals who success-
fully complete the PFS programs include that they will obtain jobs, pay taxes, y
increase the local demand for goods and services. No longer will they add to the
demand for more jail beds, emergency shelters and ancillary costs associated with
arrestos, bookings, detox, and emergency room services. Nor will they add to the societal
cost to those harmed by others’ criminality. These programs will not immediately lower
the expenditures for jail beds or homeless shelters. En cambio, successful PFS programs
will reduce the demand for additional jail beds, homeless shelters, and social services.
Successful PFS programs will allow the county to finance validated programs with evi-
denced-based effectiveness and reduce future funding levels for programs that do not
produce validated results.
Intangible benefits to the county are public health and safety externalities that are diffi-
cult to quantify. They include the never-ending social services workload generated by
individuals who are repeatedly arrested for behaviors related to their mental health,
substance abuse, and/or homelessness—such as public nuisance charges; mothers,
fathers, and young adults who spend time in jail rather than receiving the behavioral
health services that can help stabilize their lives and help them become productive
members of society; and the children of those who cycle in and out of the jail—as well
as the quality-of-life costs borne by the residents and businesses in areas where crime
and homelessness impede safety, peace, and order.
Fuente: “Measuring the Net Value Received by the County for Money or Resources Appropriated
to These Private Enterprise Projects” (report required by the county ordinance).
private and public sources of capital.
Some of the PFS cornerstones (adherence
to data, targeting interventions to specific
poblaciones, clear outcomes) have already
informed other Salt Lake County efforts.
Por ejemplo, our steering committee,
Collective Impact on the Homelessness,
has established 14 outcomes that, cuando
implemented, will reform and realign our
homeless services system. The ability of
PFS projects to bring together a multitude
of key stakeholders cannot be overstated.
Más que 30 stakeholders, que van desde
business owners and homeless service
providers to the governments and philan-
thropists that support their work, agreed
a
these outcomes. This collective
approach to what was fast becoming a
contentious public issue helped drive an
unprecedented $27 million in new state resources to create alternatives to our cur- rent shelter system, and to support home- less prevention and diversion programs. Similar initiatives now under way in my administration are focused on criminal justice, aging, economic development, and early education. PFS goes hand in hand with other county efforts to direct resources toward what works. We have invested in additional evidence-based programs, and we now have a higher expectation that we will have clear and measurable outcomes that include supporting data. Our open data portal, our partnership with Code for America, and a new requirement for data- 60 innovaciones / Policy Design Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Pay for Success as a Policy Tool including based outcomes and indicators that are tied to the budget have all been influenced by what we have learned from PFS. The data-sharing agreements we have created will help expand our current criminal jus- tice data warehouse to other critical datasets, homelessness, employment, behavioral health, and emergency services. Salt Lake County is part of the White House Data-Driven Justice Initiative and is working with the University of Chicago’s Data Science in the Social Good program to identify “super-utilizers” (individuals who use a range of human and criminal justice serv- ices repeatedly) and predict what services we can provide to change the trajectory of their need. PFS offers a concrete example of a strategic mind-shift that identifies outcomes and reallocates resources to where they can make the biggest differ- ence. We hope that successful collaborative partnerships like that between Salt Lake County and the Sorenson Impact Center will help advance other efforts around the nation to reduce recidivism and home- lessness. We believe this is the first RCT to look at the use of rapid rehousing among single adults. Our REACH pro- gram, which combines individualized criminogenic behavior interventions with intensive and comprehensive wrap- alrededor, such as housing and job training, services, will confirm whether a combina- tion of evidence-based interventions can change someone’s recidivism over the long term. Our PFS partnership has designed servic- es for the highest risk people in our com- munity, and we look forward to learning whether our efforts have informed other communities’ policy decisions affecting their most vulnerable populations. THE FUTURE OF PAY FOR SUCCESS I often remind our staff and my counter- parts in other communities that we are paying for success, not savings. The origi- nal social impact bond model was prima- rily focused on savings, and in some cases—like the Utah preschool project— early and sustained savings are possible. But savings in our two current PFS proj- ects are far in the future. Our jails are full; every time a new inmate arrives, the sher- iff is forced to release someone. Our homeless shelters are at capacity. Standing behind every individual who succeeds due to our Pay for Success efforts is a long line of residents desper- ately in need of similar treatment. I believe our Pay for Success programs will have measurable and invaluable human benefits to the people we serve, and we are cautiously optimistic that they will help move the needle. I cannot say that these programs will have an immediate positive impact on the county’s bottom line by reducing demand for effective treatments. Sin embargo, if suc- cessful, they will reduce or prevent costs over time. Fewer people will be arrested, and fewer will cycle in and out of jail, the shelters, or be on the streets. Fewer people will continue to live lives of addiction, and fewer will die of an overdose or avoidable disease. Families will be reunit- ed, jobs will be found and retained, and income and stable housing will increase. People’s lives will improve. There are hard costs associated with these outcomes but, more importantly, there is true socie- tal benefit in having a healthier, more equitable community. I want to pay for that long-term success. That is the future I choose for Salt Lake County. I and the partners in Salt Lake County’s PFS efforts believe that Pay for Success has helped us learn important lessons and gain critical insights into two complex and intertwined problems. Without PFS, innovaciones / volumen 11, number 3/4 61 Descargado de http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Mayor Ben McAdams with Jeremy Keele and Fraser Nelson Outcomes At target levels, the two projects will deliver the following community impact: (cid:2)(cid:1)1,500 more months of stable housing, o 125 años (cid:2)(cid:1)26,800 fewer days in jail or prison, o 73 años (cid:2)(cid:1)225 fewer arrests (cid:2)(cid:1)252 graduations to permanent housing some policy decisions may never have been reached; at the same time, PFS can effectively institutionalize some process- es, like rigorous evaluation in new issue areas or for government-funded services. For PFS to become a standard way of funding innovation, we agree that several things need to happen: (cid:2)(cid:1)The cost of the program development and transaction must decrease. The county spent $1,250,000 during the
program-development phase, y
those costs do not reflect the true cost
of people’s time, the deep discounts
given by our service partners, or the pro
bono assistance of our legal counsel.
This is not sustainable. We need stan-
dard legal and financial tools, and proj-
ect intermediaries are exploring how
and where efficiencies can be realized
without sacrificing project quality and
appropriate safeguards.
(cid:2)(cid:1) The time to develop and fund a pro-
gram must be shorter. Both projects
took two years from conception to
launch, and the need for interventions
is simply too great to wait so long.
(cid:2)(cid:1)We need standard data-sharing agree-
ments and access to the “big data.”
Access to administrative data needs to
be streamlined to help break down the
silos of county, estado, and local govern-
mentos, and their programs. We need to
understand the complex nature of our
residents who are failing to succeed so
we can provide them with the services
they need, evaluate the results of our
efforts, and redirect resources toward
what works and away from programs
that do not make enough of a differ-
ence. Local governments need to hire
data scientists and get rid of antiquated
equipo, thinking, y sistemas. Para
ejemplo, Sorenson Impact brought
together a data team, funded in part by
the Social Innovation Fund, to advance
the administrative data pilot that sup-
ports PFS projects across the nation.
(cid:2)(cid:1) Alternatives to randomized control
trials are needed. While an independ-
ent and rigorous evaluation was critical,
our RCT, even discounted, costo
$500,000 above the cost of the services. This is beyond the reach of most gov- ernments, and while greatly beneficial, it presents a barrier. Rapid evaluations that allow government to modify pro- grams based on evidence are a critical next step. al mismo tiempo, bajo- standing how this shifts risk back to the service providers must also be taken into account. (cid:2)(cid:1) We need the federal government to participate as a payor for success. Too many of the financial benefits of PFS programs—the true savings—go to the federal government through programs like Medicaid, Temporary Assistance for Needy Families, and veterans serv- ices. Solving the “wrong pockets” prob- lem—the benefits of a program not reaching the community it is intended to serve—will encourage more jurisdic- tions to use PFS as a tool, thereby 62 innovaciones / Policy Design Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/50/705232/inov_a_00256.pdf by guest on 08 Septiembre 2023 Pay for Success as a Policy Tool increasing innovation and resources in the social sector. The Social fund within (cid:2)(cid:1)We need Congress to support legisla- tion that will encourage social impact financing. Impact Partnership Act passed the House unanimously in July 2016. H.R. 576 was introduced during the 2017 session. This legislation would enhance greatly public-private partnership models pro- viding social services by enabling the federal government to become a payor in pay-for-performance programs. Through the creation of up to a $300
millón
the U.S.
Department of the Treasury, state and
local governments would submit pro-
posals clearly defining how high-quali-
ty, rigorously measured programs are
achieving measurable social benefits.
While much has yet to be worked out,
the bill offers clear guidance on 21 issue
areas where quality programs could
result in monetizable benefits that
accrue at the federal level: Por ejemplo,
increasing employment for individuals
currently receiving federal disability
benefits, reducing the utilization of
emergency and other high-cost care for
low-income families and individuals,
reducing the number of children
returning to foster care, etc.. A crucial
thing to understand about this bill is
that it’s not intended to reduce eligibil-
idad; quite the opposite, in fact—it’s
intended to enable state and local gov-
ernments to implement and scale pro-
grams that fit the needs of those most at
risk in their communities. In Salt Lake
County, we did just that, and it is
encouraging to see this potential on the
horizon.
(cid:2)(cid:1)The president should encourage com-
munity-led social
innovation by
building on the work of the Office of
Social
and Civic
Compromiso. The Social Innovation
Innovation
Fund, one of the initiatives from this
office that helped advance evidence-
based programs in at-risk and low-
income communities across the nation,
has generated more than $1 billion in
public-private partnerships since its
inception. Only a third of that is in fed-
eral dollars, which was matched by
local public, filantrópico, and private-
sector capital.
(cid:2)(cid:1) We need to aggregate funders to
spread the hard work of due diligence
across similarly motivated lenders.
Maycomb Capital—a new
impacto
investing platform—is putting together
the Community Outcomes Fund, a
diversified outcomes-based pool of
capital that seeks to finance projects
that address community issues, prima-
rily in the U.S. We can encourage more
community development
financial
institutions to fund through PFS, cual
could catalyze investments, incluido
in smaller communities.
The focus of PFS efforts is often on the
proyecto; sin embargo, the innovation really
exists in the fundamental way these
efforts change how government, nonprof-
es, and the private sector engage collec-
tively to solve seemingly intractable prob-
lemas. Ultimately this will enable us to
direct resources to those most in need in
our communities, and we will get to do so
in a way that delivers on society’s social
contract.
1. Salt Lake County’s elected officials include
an attorney (a mí), an art dealer, an Italian
food importer, a nonprofit director, police
and fire chiefs, a real estate professional,
and the owner of a local travel agency. Nosotros
have a balance of Republicans and
Democrats who work together
collaboratively and with purpose.
innovaciones / volumen 11, number 3/4
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